With China deal, Gulf Coast poised for new LNG boom

The Gulf Coast could be one of the prime benefactors of increased trade with China. (Kim Brent/The Enterprise)

The Gulf Coast could be one of the prime benefactors of increased trade with China. (Kim Brent/The Enterprise)

Photo: Kim Brent

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Golden Pass adds to an expanding list of LNG export terminals being developed in the U.S.

Golden Pass adds to an expanding list of LNG export terminals being developed in the U.S.

Photo: Golden Pass Products

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The first of many LNG ships entered the Golden Pass Terminal in October of 2010 carrying with it one million barrels of the material that will be used to start up the facility. Guiseppe Barranco/The Enterprise

The first of many LNG ships entered the Golden Pass Terminal in October of 2010 carrying with it one million barrels of the material that will be used to start up the facility. Guiseppe Barranco/The Enterprise

Photo: Guiseppe Barranco

With China deal, Gulf Coast poised for new LNG boom

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A new trade deal between China and the U.S. links the world's largest liquefied natural gas growth market to the fastest-growing LNG exporter and should encourage a new round of expansion along the Gulf Coast, analysts said.

The U.S. Commerce Department last week announced a 100-day action plan between the U.S. and China that, among other things, allows Chinese companies to negotiate long-term contracts to source LNG from U.S. suppliers, according to the energy research firm Wood Mackenzie.

Analysts there said the deal has the potential to alter global LNG trade.

Chinese LNG demand should, by 2030, reach 75 million metric tons per year - or about $26 billion at today's prices - triple the current volume of LNG imports, the firm said.

"The U.S. is keen for a slice of the pie," said Massimo Di-Odoardo, head of global gas and LNG research at Wood Mackenzie.

The Gulf Coast could be one of the prime benefactors of increased trade with China. Only Cheniere Energy's LNG export terminal at Sabine Pass east of Houston is operating now. But multiple LNG projects, representing billions of dollars in investment, are under construction up and down the coast.

Freeport LNG is building four trains - the facilities that purify and liquefy the gas - in Port Freeport, just south of Houston. The company, based in Houston, expects first production in 2018.

Cameron LNG, also of Houston, is looking to build five trains at its existing facility in Hackberry, La. Construction started in 2014; the company expects the first three trains to be operational in 2019.

And Cheniere has designed a five-train facility in Corpus Christi. Construction started on the first two trains in 2015; operations should start next year.

There are few other such projects outside of the Gulf of Mexico. Houston pipeline giant Kinder Morgan is building one, an LNG export terminal on Elba Island, Ga. Construction started last year, and the first liquefaction units should be in service by the middle of next year, the company said.

But the U.S. facilities now under construction may be just the start.

"Cheniere has discussed U.S. LNG with Chinese counterparties," spokesman Eben Burnham-Snyder said in an email. "We are heartened by the U.S.-China trade agreement on U.S. LNG as giving China stronger confidence in accessing U.S. LNG, including from Cheniere."

Trade rules between the countries previously prevented LNG developers from approaching Chinese companies directly, WoodMac said. The new agreement with China could now pave the way for LNG builders to target Chinese buyers - and obtain project financing on the backs of those promises.

In addition, Di-Odoardo said, the new agreement could lead to Chinese companies directly investing in liquefaction facilities on U.S. soil.

"In the longer term, the deal paves the way for a second wave of investment in U.S. LNG," Di-Odoardo said.

The U.S. deal with China, however, increases pressure on projects in Australia, East Africa, Canada and Russia to lower costs and remain competitive.